Sebi slaps Rs 42.50cr fine on 21 entities for fraudulent trade

The entities had traded fictitiously in the scrip of the firm without the intention of change of beneficial ownership

In on of the largest penalty imposed by Sebi in recent times, market watchdog today slapped a total fine of Rs 42.50 crore on 21 entities, including companies and brokers, for manipulative share trading on the listing day of Bharatiya Global Infomedia Ltd (BGIL).

A Securities and Exchange Board of India (Sebi) probe has found that the 21 entities which were connected to each other and/or BGIL had traded fictitiously in the scrip of the firm without the intention of change of beneficial ownership.

The entities had executed structured, synchronised and circular trades among each other.

"Accordingly, a total penalty of Rs 42.50 crore is imposed on all the noticees," Sebi said in an order today.

Of the total Rs 42.50 crore, V P Patel and Marutinandan Infosolutions have been levied with a penalty of Rs 6 crore each, the maximum among the other entities.

Besides, the regulator has imposed a fine of Rs 5 crore on Korp Securities while it has slapped Rs 3 crore each on -- GRD Securities, Swift Tie-up and Jalan Cement Works.

GRD Securities, Korp Securities, Vimgi Investments, Prem Somani Share Brokers, Shaswat Stock Brokers, Shree Bahubali International and PELF Finstock -- have also been penalised for violating broker regulations.

Sebi said that -- Shree Bahubali International and PELF Finstock -- had traded in a fraudulent manner so as to give exit to various allottees and thereby created artificial volumes and misleading appearance of trading in the scrip.

The other brokers had aided and abetted their clients along with others in the execution of structured trades.

As per the Sebi order, the entities made unlawful gains of nearly Rs 12.80 crore through the fraudulent trading.

Sebi had conducted an investigation into the alleged irregularities to the Initial Public Offer (IPO) of BGIL and its subsequent trading on the listing day (July 28, 2011).

On the first day of trading on BSE, the BGIL scrip opened at Rs 81.9, went up to Rs 83, stayed between Rs 60-70 for some time and then plunged to 29.90 at close.

On NSE, it opened at Rs 84 (day's high) and then plunged to Rs 30.95 at close.

Major allottees who were allotted shares in the IPO of BGIL had sold the shares so allotted on the listing day.

In 2011, Sebi had barred BGIL from raising capital from the securities market and prohibited the company, its promoters and directors from selling or dealing in the stock market. The order was later confirmed in 2012.